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To understand the advantage of debt capital from a tax perspective in the United States, determine the before-tax and approximated after-tax weighted average costs of
To understand the advantage of debt capital from a tax perspective in the United States, determine the before-tax and approximated after-tax weighted average costs of capital ifa project is funded 55%45% {D-E mix} with debt capital borrowed at 14% per year. A recent study indicates that corporate equity funds earn 14% per year and that the effective tax rate is 37% for the year. The tax advantage reduces the WACC from '36 to % per year
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